Facebook stock climbs, but firm faces lawsuits

AP, NEW YORK and Washington

Facebook chief operating officer Sheryl Sandberg speaks during Class Day ceremonies at Harvard Business School in Allston, Massachusetts, on Wednesday.

Photo: Reuters

Although Facebook Inc’s stock recovered on its fourth day of trading as a public company, the company also faced shareholder lawsuits as the fallout continued from the social network’s botched initial public offering (IPO).

The stock climbed US$1, or 3.2 percent, to close at US$32 on Wednesday.

The gain was only a small reprieve for shareholders. The stock’s rocky inaugural trading day on Friday last week was followed by a two-day decline. The stock is still trading nearly 16 percent below its US$38 IPO price.

The IPO was tarnished by a half-hour delay in the trading of Facebook’s stock, caused by glitches on the NASDAQ Stock Market. It was marred further this week as investors began accusing the banks that arranged the IPO of sharing important information about Facebook’s business prospects with a select group of clients.

Several shareholders who bought stock in the IPO have filed lawsuits against Facebook, its executives and Morgan Stanley, the IPO’s lead underwriter.

At question is whether analysts at the big underwriter investment banks cut their second-quarter and full-year forecasts for Facebook just before the IPO and told only a handful of clients about it.

Morgan Stanley declined to comment. Facebook said the lawsuit is without merit.

Meanwhile, two US congressional panels are reviewing Facebook’s high-profile stock offering last week.

US Senate Banking Committee Chairman Tim Johnson said late on Wednesday that his panel wants to learn more about the offering. The House Financial Services Committee is also gathering information about Facebook’s IPO.

Adding to the day’s events, Facebook was in talks with the New York Stock Exchange (NYSE) to move its stock from the NASDAQ after the botched offering, according to a person familiar with the matter.

The person spoke on the condition of anonymity because they were not authorized to speak publicly. News of the talks was first reported by Reuters.